Gold Soars as US-Iran Deal Eases Inflation Risk
Gold prices surged on Monday (June 15th) after oil prices fell and inflation concerns eased following the announcement of a preliminary peace deal between the United States and Iran. Spot gold rose 3.2% to US$4,353.75/oz at 9:27 a.m. ET, hitting its highest level since June 9th and extending its gains for a third consecutive session. Gold futures also rose 3.2% to US$4,375.95/oz.
The main catalyst came from the planned signing of a memorandum of understanding in Switzerland on Friday, with Pakistan acting as a mediator. While the US and Iran have not released specific details, President Donald Trump said the deal would unblock the Strait of Hormuz, a vital waterway that before the war carried about a fifth of global oil flows.
The decline in oil has been a major fundamental factor for gold. Brent, which had previously hovered above US$110/barrel during the escalating conflict, is now just above US$80/barrel. If the oil slump persists, energy inflation pressures could ease and reduce the risk of global central banks turning more hawkish.
The US dollar's weakening to a 10-day low also strengthened bullion. During the war, the dollar found support as a safe haven asset. However, when risk sentiment improved after news of peace, demand for the dollar waned. A weaker dollar made gold cheaper for foreign buyers and provided a boost to prices.
On the monetary policy front, the market now sees the probability of a Federal Reserve interest rate hike in December dropping to 55%, from 69% a week earlier. Because gold offers no yield, expectations of lower interest rates tend to support the price of the precious metal.
However, the market is still awaiting certainty about implementation. Iran has indicated that the agreement will not come into effect until it is signed, while technical details of the Hormuz opening have not yet been released. The next focus will be the signing in Switzerland, the direction of oil prices, the movement of the US dollar, and the Fed's decision on Wednesday. (arl)
Source: Newsmaker.id
